.png)
.png)
HMRC have explained their revised policy on VAT on excess charges and other penalties levied in non-local authority car parks.
Revenue & Customs Brief 57/08 also covers what taxpayers should do if they have incorrectly accounted for VAT on such charges.
Certain excess charges that have, to date, been regarded as further consideration for a taxable supply of parking are now regarded as outside the scope of VAT.
Business Brief 19/02 explained the Revenue's policy on the VAT treatment of excess charges in off-street car parks following Bristol City Council (17665) where the tribunal ruled that excess charges levied by the council in its off-street car parks were outside the scope of VAT.
This was because they were levied under the Road Traffic Regulation Act 1984, rather than being part of the contract between the driver and the car park operator. In other non-local authority off-street car parks excess charges would normally be subject to VAT because they formed part of the contract between the driver and the car park owner.
This followed the decision in J G Leigh t/a Moor Lane Video (5098), which concerned additional charges for videos held by customers beyond the agreed period of hire.
In the light of new legal advice, HMRC now accept that where a car park operator makes an offer of parking under clear terms and conditions, setting punitive fines for their breach, the fines constitute penalties for breaching the contract, rather than being additional consideration for using the facilities. Consequently, they are outside the scope of VAT.
Since the same contractual relationships arise between drivers and local authority car park operators as arise between drivers and other car park operators, HMRC have decided that the VAT treatment of excess charges will be the same for all operators.
Thus, penalty charges levied where a driver is in breach of the terms of the contract with the car park operator will no longer be subject to VAT. The commonest situations where a driver may be in breach of the contract are:
- No parking ticket on display.
- Underpayment.
- Overstaying purchased parking time.
- Parking outside marked bays.
- Parking in bays set aside for disabled drivers or parents with children.
Where the terms and conditions make it clear that the driver can continue to use the facilities after a set period upon payment of a further amount without being in breach of the contract, for example, no charge for an initial three hours parking but £70 if that period is exceeded, the payment will be consideration for use of the facilities and subject to VAT.
Some owners contract out the management and operation of their parking sites and allow the contractor to retain all or part of the penalties collected. Any such payments retained by the contractor will constitute further consideration for their services supplied to the parking site owner and are subject to VAT.
HMRC invite taxpayers who believe they have accounted for VAT incorrectly to submit a claim for the overpaid tax.
